People always have the same dream when it comes to owning a house. To own a home is hard. A home costs a lot of bucks, which can be thousands or millions of dollars. Apply for a mortgage when you plan to buy a residential property if you can’t make it in cash or you want to make it in an installment mode.
Get a mortgage
A mortgage pre-approval can be a perfect option, a process in which a lender evaluates a borrower’s financial and credit history to determine the maximum amount of money they are willing to lend for a home purchase.
Here is how the mortgage pre-approval process works:
- Application. The borrower applies to a mortgage lender or financial institution. The application includes:
- information about the borrower’s income
- employment history
- credit score
Some lenders may charge a fee for this application, while others offer it free.
- Documentation. The borrower must provide supporting documentation, such as:
- pay stubs
- W-2s, bank statements
- tax returns
- Credit check. The lender gets the borrower’s credit report and the credit score to evaluate the creditworthiness. A good credit score is typically important for obtaining a mortgage pre-approval.
- Financial assessment. The lender reviews the borrower’s financial information and calculates their debt-to-income (DTI) ratio, which measures how much their income goes toward debt payments. Lenders have specific DTI ratio limits that borrowers must meet to qualify for a mortgage.
- Pre-Approval letter. A pre-approval letter is sent to the borrower upon meeting the lender’s criteria. The letter states the maximum loan amount the borrower is eligible for on the lender’s evaluation. It also typically includes the interest rate and duration (term).
The final approval and terms of the mortgage will depend on various factors, including the property appraisal and any changes in the borrower’s financial situation.